Capitalisn’t: Is Capitalism Killing Democracy?

Martin Wolf: I hope to persuade people who believe in democracy that, actually, the market is quite a good thing. I don’t know how many people I will persuade, but I do think it is really im-portant.

Bethany: I’m Bethany McLean.

Phil Donahue: Did you ever have a moment of doubt about capitalism and whether greed’s a good idea?

Luigi: And I’m Luigi Zingales.

Bernie Sanders: We have socialism for the very rich, rugged individualism for the poor.

Bethany: And this is Capitalisn’t, a podcast about what is working in capitalism.

Milton Friedman: First of all, tell me, is there some society you know that doesn’t run on greed?

Luigi: And, most importantly, what isn’t.

Warren Buffett: We ought to do better by the people that get left behind. I don’t think we should kill the capitalist system in the process.

Bethany: As our regular listeners know, our goal in this podcast is to explore what’s working in capitalism and what isn’t. A really important aspect of that—or maybe the core of it—is the relationship between capitalism and democracy. In fact, our very first episode was about this, as some of our loyal listeners may recall.

That’s why we are really excited by longtime Financial Times columnist Martin Wolf’s new book, The Crisis of Democratic Capitalism. The core of his argument is that liberal democracy and market capitalism are inextricably linked. He writes this: “However different they may seem from each other, market capitalism and liberal democracy rest on the same underlying philosophical values.”

He quotes Larry Siedentop as arguing, “Western beliefs privilege the idea of equality, of a premise that excludes permanent inequalities of states and ascriptions of authoritative opinion to any person or group, which underpins the secular state and the idea of fundamental or natural rights. Thus, the only birthright recognized by the liberal tradition is individual freedom. The core belief underpinning a market economy is the right of individuals to change jobs, create businesses, lend and borrow money, and spend how and where they wish. It is an individualistic creed.”

He also writes this: “The answer is that capitalism cannot survive in the long run without a democratic polity, and democracy cannot survive in the long run without a market economy.” But Wolf also argues that both are under threat. He argues that as wealth and economic power have become increasingly concentrated, liberal democracy inevitably comes under threat.

In summary, as he says, “Capitalism may lead to democracy but then may destroy it.” And so, the fundamental purpose of his book is an argument that both democracy and capitalism urgently need reforms in order to survive.

Luigi: As you know, most people might think that democratic capitalism is an oxymoron, and for you, it is the magic yin and yang. In the book, there is more than a wink and a nod toward Schumpeter’s Capitalism, Socialism and Democracy. As far as I know, Schumpeter is considered by many political scientists as the father of the realist version of democracy, democracy as the practice of competitive elections, versus a more substantive version of democracy as the expression of the will of the people. Which one of the two do you espouse?

Martin Wolf: Well, I think I espouse—though I don’t put it that way—neither. I certainly don’t believe in the notion of the will of the people. I don’t think there is such a thing, and the attempt to find it, I think, almost ineluctably leads to dictatorship.

The people don’t have a single will. That’s the beauty of pluralism. Everybody has a different will. If somebody comes along and says, “Because I’ve been elected, I embody the will of the people, the popular will,” this is a claim which amounts to saying that all that diversity doesn’t matter, and all these differences of opinion don’t matter. And the people who lost don’t matter. They’re not really part of the general will. I can do whatever I like, because I embody the general will. And I don’t accept that. So, I don’t like that.

However, it’s not just about having elections. There are preconditions for elections to be genuine and to be a durable process for selecting leaders. So, I refer to liberal democracy, by which I mean a democratic process in which elections decide on who is in government. But in order for that to work, there need to be independent institutions that allow elections to be fair, that allow parties to operate, that allow media to operate freely. And this requires protection, in addition, by the system of law, as we saw in America very recently. So, liberal democracy is more than just elections.

Luigi: Take the United States pre-Trump. For once, let’s get Trump out of the picture. Many decisions, for example, campaign financing . . . You say that the majority of the American people would prefer a different outcome, but this different outcome cannot get through. Do you call this a democracy, or is it a failure of democracy, or are you fine, because after Trump and even with Trump, we had free and fair elections?

Martin Wolf: I think the US, which is not the overwhelming focus of my book, though it’s obviously the most important case . . . and I do argue this in the book that some of the conclusions that have been reached by the courts on what the American constitution allows people to do—and you’ve mentioned particularly election financing—go so far, in my view, as to subvert the notion of democracy rather profoundly and shift the US quite strongly in what I regard as a worrying direction, which is towards plutocracy.

Bethany: You write at the start of the book . . . and this is really core to our podcast, trying to understand this relationship between market capitalism and liberal democracy. And you write, which I found really interesting, that they rest on the same underlying philosophical values. Can you explain that?

Martin Wolf: I was trying to think about what is special and different about the political and economic arrangements, and indeed, the social assumptions of our society. And it seemed to me that it starts off with, we don’t accept the notion of ascribed status. Your status in society is not defined by who your parents were, what social class you were born into. You’re not a ruler because your father was a ruler. You don’t control all the resources in the country because your great-great-great-great grandfather conquered bits of it. It’s up to you. And once you accept that, you accept the idea that individuals have agency, they have the right to exercise that agency. And that means there must be a legal system that protects them from the more powerful in allowing them to do that. It means that they can exercise agency as individuals.

But I also argue that politics, as Aristotle once said, is an inherent feature of human society. You cannot abolish politics. This is, to my mind, the great mistake of libertarians that, somehow or other, one can wave a wand, and the normal political processes will all disappear and be replaced by individual agents. We need collective decision-making. And that means that agency also applies to collective decision-making, and that is the right of individuals and associations of individuals, parties, trades unions, private associations, corporations—you could argue, I wouldn’t—to have a voice in politics. And that leads you, I argue at length, naturally to the democratic idea, because if you accept that you don’t have ascribed status, that means every adult, at least, has a right to play a part.

Now, it seems to me that it is not only not necessary, it is immensely complex, cumbersome, and costly for individuals to have to get together, society to get together, to make all economic decisions. Indeed, it’s obvious that that doesn’t make any sense. So, economic life can and should be organized in different ways, and the market is, of course, the most powerful organizing principle: competition, the dynamism generated by competition, and so forth.

Now, there is a perfectly legitimate question about how those economic entities that act in the market should be organized. I’m deliberately agnostic on whether and how we should change the voting structures. I discuss this, for example, in corporations. But the broader point I make is that I have become rather persuaded in these great arguments at the middle of the 20th century between Friedrich Hayek and Polanyi, Karl Polanyi, over what the free market means.

And Polanyi basically made a fairly simple point, which is that most people, or at least a large proportion of the population, will not ultimately accept, in a democratic society—they can be repressed into it— the insecurity that a completely free market will necessarily generate, because there’s just so many markets they would like to have to ensure themselves against unemployment and ill health and their children against similar problems that simply will not exist without public engagement. A completely libertarian society, an absolutely libertarian society, will, in my view, exist only under an autocracy or an extremely powerful and narrow plutocracy. And that’s not the sort of country I would like to live in. And it’s not one I would properly regard—but this is where, of course, a big debate can be had—as free.

I’ve come to the view that if you want democracy—and I do, for a whole host of reasons I discuss—and you want capitalism, then you need to compromise on some respects between the two. And one of the core compromises is that the government is going to become big-ish. And, indeed, that’s exactly what’s happened. I have a table in my book which shows how government spending as a share of GDP has risen dramatically in all developed democracies over the last century—overwhelmingly, by the way, on providing social insurance and in supplying certain, very obvious public goods, education and health being the most important. I think that is an iron law of democratic politics, and you just have to accept it, and most developed countries accept it. The US doesn’t fully, and I think that’s a problem.

Of course, you can do it relatively well or badly, relatively wastefully or not, and it’s difficult to do. My core view, which I didn’t hold when I read The Road to Serfdom in 1980, is that Hayek’s subsequent work, much of which was essentially about constraining democracy until it couldn’t do anything, was not acceptable and actually unworkable. It would lead to a political breakdown and ultimately to autocracy.

And my final point is, once you do have an autocracy or a narrow plutocracy, as we’ve seen again and again and again, this system will be rigged for the benefits of these incumbents. And that’s not necessarily going to be liberal capitalism—in fact, very far from it. If you want to see that, I think the best examples in the modern world are the Latin American states, where these sorts of regimes have been very potent for a long period and have created nothing but problems. So, Switzerland is a better model.

Luigi: Last year we interviewed Piketty. I think he would subscribe to your view of democracy, but he would also push it into the economic sphere. He would like to have all companies vote as one person, one vote, rather than one dollar, one vote. My understanding, reading your book, is that you subscribe to the general view of capitalism, where it is not one man, one vote, but one dollar, one vote, when it comes to economic decisions. First of all, is my reading correct? And two, how do you reconcile this aspect with the democratic aspect?

Martin Wolf: If Piketty is suggesting that in a company there should be some form of workers’ control embedded in a market framework, that doesn’t actually give full democratic control in the society to what businesses do. It’s still a subset, possibly a tiny subset, of the population that will decide what companies do. All we’re really debating, then, is the relative power of shareholders versus other stakeholders in the business, how you would define the role of the other stakeholders in the business.

And my own view—this is pragmatic—is workers’ rights are potentially very valuable but quite difficult to manage. We could discuss that at greater length. What I think will happen if you decide that you need a just socialist economy is you would say all property should be held in common by society at large, and the economic organization of the economic processes within society should be determined by collective decision-making.

And my argument in the book—this is the practical argument—is that that necessarily involves, not an accident, decision-making by the state on how the economy should be organized and planned. And that, in my view, ineluctably leads, because of the extent of the control the state would then exercise over economic life, not only to severe economic inefficiency through the suppression of all market mechanisms, but worse—or at least as bad—dictatorship, because of the extraordinary concentration of power that entails.

If you think of the former, sort of workers’ control embedded within the market economy, then that’s essentially a question about how you organize businesses, how they organize themselves, and that’s a very interesting one. But if you’re thinking about the collective organization through politics of economic life, I think that leads to catastrophic results. And I discuss these possibilities in different places.

Bethany: The legitimacy—and tell me if I’m getting this wrong—of market capitalism, in many ways, rests on the fact that it has created economic growth, and you write that market capitalism drove economic growth. You have some stunning statistics, including that over the last two centuries, the proportion of the world’s population living in extreme destitution fell from 80 percent to 10 percent, despite a more than sixfold rise in the human population. Just to play devil’s advocate, what would you say to someone who said that’s correlation, not causation?

Martin Wolf: Well, I would say, of course. that they’re wrong. Prosperity, widely shared prosperity, was both, as it were, the promise and the insistence of capitalism, insistence by the people. And a core of my argument is that the failure to do this as well as we thought we would is a very big reason for the political dissatisfaction we are seeing in so many Western democracies. So, that’s the really big issue. It’s the core thesis of my book.

But on your specific point, the answer I would say is something like this. Destitution, that is to say, living essentially at subsistence or near subsistence, for the vast majority of people, 90 percent or so everywhere in the world in about 1800, was simply the consequence of the immensely low, from our point of view, productivity and therefore output of the economies of that time. People made staggering numbers of innovations and raised the productivity, the production level, and the variety of products in our society dramatically.

It seems to me unambiguously the case that if you look at this immense revolution—it was, in the 19th and 20th century, in the productive capacity of our economies—you have to ask what caused it. It later became increasingly the role of science, but again, it was science harnessed by capitalist enterprise.

It seems to me about as clear as anything can be that this wasn’t manna from heaven. It was the product of an economic revolution, which then became a social revolution and a political revolution. And, indeed, one of the consequences I argue of this was to create an economy which gave people more than subsistence, increased the need for an educated workforce, increased the possibilities for organizing workers, and it raised the demand for workers and therefore raised wages. And increasingly, in the last 40, 50, 60 years, this has gone worldwide. It’s the greatest revolution of our lifetime—it’s clearly created problems—and I think we should recognize it for the great triumph it is.

Bethany: It strikes me that you are, in many ways, a believer in meritocracy, and yet you also write this, that it’s desirable but not as a dominant value system. How do you have the concept of meritocra-cy in a society and yet prevent it from becoming the dominant value system?

Martin Wolf: First of all, it’s very, very important that the meritocracy be generally a meritocracy, which means you have to do everything you can to generate equality of opportunity. Second, you need to make clear that meritocrats, people in positions of influence and power, have social responsibilities. This is the value ethic of a society, because I believe in the notion of mutually responsible citizens. Third, I think it is necessary that there be this basic welfare bargain, as I argued.

And finally, and this is, I think, Michael Sandel’s argument, we shouldn’t take the view that the value of a human being is defined by the position they achieve in society. People aren’t more valuable human beings because they’re billionaires. They’re just billionaires. It’s important to insist upon this, and I think it is one of the core values of the great religions with which I sympathize very, very strongly. The way I think of meritocracy is as a necessary evil, but it must be accepted that it isn’t an unlimited good.

Luigi: In your book, you discuss the elite and the failure of the elite. How can we build a more civic-minded elite?

Martin Wolf: We have created—very imperfectly, incredibly imperfectly—in many Western countries a sense that outright corruption, just buying legal officials, buying judges, even buying politicians, just isn’t really right. It’s not the way you should be doing things. And similarly, I think in many societies there is a sense that there are social responsibilities successful and powerful people have, because that’s the way the bargain of the society works.

Now, I would like to try and build on that. One of the things I talk about is—and again, it’s something I wouldn’t have dreamt of thinking about 40 years ago—should we have some sort of national service arrangement for all young people, so that they get to know one another, they get to know people from different backgrounds, they get to know more realistically what people’s lives are like, simply to get them a better sense of belong-ing?

Isn’t that part of why Switzerland, with its immense diversity—ethnic, and above all, linguistic—manages to be a functioning society, because they actually all share military service? I’m not suggesting military service.

Now, I don’t know whether any of these are the answers, but the thing I am absolutely clear about, having spent a lot of time working on developing countries and looking at what’s going on, is if you don’t have what one friend of mine calls a serving elite, an elite that thinks it is responsible for the state of society and not just its own bank balance, then society will collapse into plutocracy. And if that is what you get, every case I know of in history ends up as a feral society. And you can’t just create an ethical society by writing laws and punishing people if they break the law. You can’t. It’s unbelievably, incredibly costly to make such a society work. It’s very, very ineffi-cient.

Most people would argue—the great German sociologist Weber, for example—that the norms of society, in his case Protestantism, are central to making a good society, which I define as one which has democratic political institutions and substantial individual freedom, including economic freedoms. It’s something we have to do, and we have to reemphasize how important it is, and we have to do so in a way that doesn’t exclude people but pulls them all in. Whether that can be done, I don’t know, and it is way outside my areas of knowledge and compe-tence, but I think it’s essential.

Bethany: Martin, you say that your views have changed over the past 40 years, that this wasn’t a view that you would have had 40 years ago. What have been the seminal events that shaped your point of view, that brought you here?

Martin Wolf: I think that there are two things, one relatively insignificant and one very profound. The relatively insignificant one is to realize that one can have too much of a certain form of capitalism. It can become seriously unstable. Financial crises really are a problem.

But more profoundly, if you don’t have an active state, there really is a risk of rent-extracting behavior. Probably the book that did more than anything else to alert me to this was one that Luigi coauthored with Raghuram Rajan about 20 years ago, I believe. And I think that brought that out very well. You need countervailing power.

Bethany: A follow-up to that and also a concluding question. You’ve written a book about the importance of liberal democracy and of market capitalism, and you have a great deal of important thoughts about how we fix this. And yet you write this at the end of your book: “As I write these last paragraphs in the winter of 2022, I find myself doubting whether the US will still be a functioning democracy by the end of the decade.” Do you think this is doable?

Martin Wolf: Well, I have two views on this. Hope is mandatory. I have always accepted, believed, that despair is a mortal sin, though there are situations in which despair is very legitimate. But despite being a bit encouraged with what happened in the midterms, there are elements in the US of people who do believe in, if you like, the tyranny of the majority, that if you win power and you possess the power which all states have over the legal processes, for instance, through the Justice Department, over the military, over the espionage services, over police services, that you are entitled to put in place running these things people who are personally loyal to you and your aims, not to those of the society as a whole and certainly not to liberal democracy.

But I don’t think anymore that we can take for granted how the fight ends up. It seems to me we must hope, but we cannot be complacent. And I hope to persuade people there’s more to progress than just the market. And I hope to persuade people who believe in democracy that, actually, the market is quite a good thing. I don’t know how many people I will persuade, but I do think it is really important.

Bethany: Luigi, what did you find most interesting about his argument?

Luigi: I think where he is coming from, when you read a business commentator talking about democracy and capitalism, you start with the presumption that he cares deeply about capitalism, a little bit less about democracy. And so, to my surprise, that was not the case, and especially at the end, he has some interesting ideas about how to improve democracy that go very much in the direction of improving the decision-making and making it easier for people to get what they want. Because I think there is a subtle distinction, even in the political-science literature, whether democracy is about, basically, free and fair elections, or whether it is about trying to implement what people want.

Bethany: Huh. And which side of that do you come down on? What do you think it’s about?

Luigi: I am 100 percent on the side of doing what people want, but I’m certainly a minority among the academic economists. I remember distinctly, there was a panel at Brookings immediately after the election of Donald Trump, and there was a prominent Democrat who was, I think, in the State Department during the Clinton administration, who said very clearly, if the trade-off is between a little bit more democracy or a little bit more getting the right decision or the efficient decision, I don’t remember the exact word, I’m for the right decision all the time, which for somebody with a title of Democrat is a bit funny.

Bethany: That is an oxymoron, an oxymoron largely writ, correct?

I really liked the book. I have struggled to articulate what the commonality between democracy and capitalism is, why one needs the other. And so, I thought his articulation of it, I’m not entirely sure it’s all encompassing, but I really like his attempt to articulate that core relationship.

And I also liked that he doesn’t view it as a static thing. In other words, just because they are core to each other, he doesn’t say, “Aha, hands off, look, it’s all good.” He really points out this very interesting almost dialectic in which the whole thing is actually quite fragile and that the extremes of capitalism actually can begin to destroy a democracy. And so, I thought of them almost like the strands of a basket interwoven, and they need to be woven together in order to create a basket that is a healthy society. But I thought that was also really interesting.

Luigi: What I find interesting is that the way he connects the two and says why they’re intrinsically related is mostly philosophical. To me, you need somebody who designs the world in an impartial way. Anybody who has that power can be corrupted. It is a decentralization argument. If the power is really in the hands of everybody, it is very . . . you can’t bribe everybody, it is not worthwhile. And so, you end up having the right rules if everybody really is involved.

Now, of course, there are technical aspects. I’m not saying that . . . This is maybe too idealistic a view. This is a straight economic argument to connect democracy and economics. He used a philosophical argument, but a very good one.

Bethany: Doesn’t it make you wonder if maybe part of the training for an economist should be at least one class in cross-fertilization between economics and philosophy?

Luigi: Oh, absolutely. Yeah.

Bethany: I’m curious, do you agree with this argument that democracy and capitalism are inextricably linked, or do you think you can have capitalism without a democracy, at least a form of it?

Luigi: Oh, I do believe that they are intrinsically linked. I more than believe, I wrote about this in my book A Capitalism for the People, 10 years ago at this point, 11 years ago at this point, precisely making this connection, and also making a point, in different ways, about the fragility of the system, because it’s clear that there is built into democracy a natural tendency to redistribution that might reduce the incentive for a capitalist system to work.

On the flip side, there is intrinsic in the capitalist world a tendency toward concentration of power, not only wealth but also power, that will lead to a plutocracy. So, I think that it’s a very unstable equilibrium and something that we need to work on to maintain.

Bethany: It’s interesting. Again, I sometimes wonder if unstable situations, if that’s necessarily a bad thing, or if sometimes that’s the beauty of them, that they keep each other in balance and that there is, or at least there should be, a sort of constant ongoing recalibration and system of checks.

His point that the major problem has been, as we’ve highlighted on this podcast and so many have, just the completely unequal economic outcomes and that that has played a major role in the disintegration of our system . . . I thought that was fascinating, if obvious, but—

Luigi: I agree. If I may raise a criticism, is that I didn’t see the obvious connection of what the mistakes are that capitalism made that led to this very negative outcome. So, did we face a temporary shock, or is what has evolved a structural problem that needs a structural solution?

Bethany: That’s a really interesting way of putting it. I think he does highlight in several places . . . although he doesn’t actually explore what should have been, he’s not concrete about what should have been done differently. But he does note, for instance, that globalization came with a lot of false promises and without any kind of protection for those who were going to be left behind by it.

I’m not sure that really addresses your question, but I think that is a failure of policy rather than necessarily a structural part of capitalism that was going to play out in this extreme way. Maybe it was a failure of foresight, or nobody was able to figure it out, and there still has not been a sensible policy for how to have your globalization cake and eat it too.

Luigi: Yeah. So, at the end of the day, do you come out with the view that he wants to moderate globalization in some forms or not?

Bethany: I did not. I thought he was more of a defender of globalization, yet he also does acknowledge that one of the things that has gone wrong in this economic relationship is globalization’s failure to deliver wins to society at large. I’m not sure. I think it’s always easier to say something went wrong than it is to say what, concretely, we should have done differently.

Luigi: Yeah, this is the question that we asked Glenn Hubbard almost a year ago, and I think he did not have a convincing answer. I don’t think there is an easy answer to what we would have done differently.

Bethany: Yeah. And that goes back to the question you started with, which is, what has gone wrong that is built into this unstable relationship between capitalism and democracy, and what has gone wrong that has just been stupidity, things that policy choices could have done differently.

In other words, did we have to end up here because this structure is ultimately unstable, or are there very clear turning places along the road, and even more, are there clear turning points where it was obvious at the time that this was problematic?

Luigi: Yeah, because at the end of the day, I actually like his suggestions about democracy much more than his suggestions about the economy. And not because I disagree with his suggestions about the economy, but I don’t think that they are so deep to change as to the outcome dramatically. His idea of having, for example, a chamber of people that are randomly picked, and they stay there for 10 years, and they are only asked certain particular questions, but they address an issue of representation of people’s will, independent of campaign financing, independent of the structure of how we aggregate from the party system, and so on and so forth . . . I thought this idea was good.

And I love his idea of using more referenda, and I have to say, I found it very bold that a British guy is in favor of referenda, especially one who is clearly against Brexit, because he is able to go beyond the contingency of a referendum that was clearly poorly conceived versus a world like California or Switzerland where referenda are, by and large, working very well.

Bethany: Yeah, I thought that was really interesting as well. Although, on the point of California, I was talking to my sister over the holidays about one of the recent ones. And if we were going to actually implement referenda in a broad way, you would have to make sure that the way in which the referendum is worded is tamper-free from politics, because I think the ways in which things are worded can be incredibly unclear and convince people that they’re voting for something when, actually, they’re voting for something else. You’d have to get lobbying out of every stage of the process.

It obviously worked incredibly well in the case of Kansas. I was in Kansas at the time, so I found it remarkable, because the people I was with were terrified about what the vote was going to be on a woman’s right to an abortion. And everyone thought Kansas as this deep-red state was, for sure, going to outlaw abortion. Instead, when it was put to the vote of the people, that wasn’t the answer at all, and that’s a fantastic example of exactly what you’re talking about.

Luigi: Yeah, I have to say, this is one of the few things that Italy did right, to put some of these fundamental rights like divorce or abortion to a referendum. In 1981, a country that is overwhelmingly Catholic voted 65 percent in favor of the right to abortion. And nobody has ever discussed this ever since. Once you have that, it’s very difficult to quarrel with that. If you have a majority, 65 percent majority, saying something, even the most conservative Catholic couldn’t say anything.

Bethany: I did like his nuance about the will of the people and what that means when you have somebody claiming that they have the will of the people and that they represent the will of the people and how that can lead inevitably to a dictatorship. Maybe that’s obvious in certain lines of thinking, but I had not thought about that.

Luigi: I think he’s absolutely right, but this is where there is a subtle balance, because on the one hand, you don’t want anybody to claim they, individually, represent the will of the people. On the other hand, you are puzzled when there is a big disconnect between what people want and what happens. Most people want some gun control in the United States, but you don’t have this implemented. Most people want some restriction of campaign financing, but you don’t have it represented. And I can keep going, and you see how distant the United States is from a true democracy.

I would like to build on this point, because I think I find it very interesting, which is the issue of, number one, the sense of citizenship, and number two, the sense of responsibility of the elite.

First of all, I have to say, I agree with him 100 percent that these two things are important. My struggle is how you can build that without an intrinsic sense of superiority. Because one way to build a citizenship is by saying that we are all the same, but that’s not possible, nor desirable, in the modern world. However, another way is to build in a sense of superiority for your group. So, it’s easier to create a sense of belonging if you feel that you are a superior group and you exclude others.

Bethany: I was thinking about this as almost a lesser-of-two-evils argument, and I’m thinking out loud, so I’m not sure. For sure, he is definitely an elitist. He writes this at the end of the book. “Finally, his conclusion returns to the core issue, namely the responsibility of elites for safeguarding the fragile achievements of democratic capitalism before they disappear in an incoming tide of plutocratic populism and tyranny.”

He states his position pretty clearly. He’s an elitist. But if the two poles—and I might be too extreme by articulating these two poles—but if the two poles are elites who are created through plutocracy and crony capitalism, and some of the things we’ve discussed, like the wealthy being able to game the system in order to stay wealthy and get their children into the right colleges, and that’s the creation of an elite with no sense of responsibility, or the creation of, to use a dangerous word, a meritocratic elite with some sense of responsibility, I think you’d rather the latter than the former.

In other words, it strikes me, maybe it’s not as simple as that breakdown, but it strikes me that what we have now is the worst of all worlds. We have a pretense that we don’t have a system of elites, but we actually do have a system of elites who use whatever leverage they can in order to safeguard their privileges. And those privileges don’t come with any attendant sense of responsibility. So, it seems to me right now, we have the worst of all worlds.

Luigi: I think you’re right. And this is a nice complement to our discussion of meritocracy, something we should have said when we had Sandel or even Wooldridge. The moment you create, or you have the pretense to have a meritocratic elite, the elite does not feel any sense of responsibility, because they’re there because they deserve it, not because they are serving the nation or because they owe something to the nation.

Paradoxically, the old-fashioned nobles felt really insecure, especially in the 20th century, about being there. They needed to justify why they were there. And so, they started to develop a sense of responsibility as a way to demonstrate that they deserved to be leaders, because they are the only ones with a sense of responsibility. And part of it is the British elite that ran an empire were justifying their position through their sense of responsibil-ity.

Bethany: I think you’re right. There are all sorts of ugly things that also can come with that sense of responsibility. There definitely are no simple answers here. I was thinking and wondering, can you inculcate a healthy sense of responsibility in people with a meritocratic society?

In other words, is the flaw immediately built into the assumption of a meritocracy in that, as you said, and as Sandel has argued, that once you have that system, people believe that they did it themselves and they don’t owe anything? Or could some of Wolf’s ideas about citizenship and the importance of citizenship serve to offset that, such that you could have a meritocratic system that nonetheless came with a sense of responsibility to country and fellow man, and then, to follow up on your point, a sense of responsibility that is a healthy one and doesn’t justify things like colonization?

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If I had one criticism of his book, it’s that he clearly is uncomfortable with where a lot of the extremes of capitalism have gotten us to. This is going to be too harsh. But I felt like some of his ideas around the economy were more hand-waving and lots of words than they were concrete suggestions for what you actually did, whether it’s taxation, whether it’s globalization, whether it’s financialization, all of which, arguably, are complex and nuanced.

What exactly did we do wrong, and what exactly do you do differently, or is it just impossible to ever be that prescriptive? Do you think I’m being unfair, or do you agree?

Luigi: No, I don’t think you are unfair. I think that it’s a very high bar to ask. I don’t know anybody who has a convincing answer to that, to be fair. So, he’s struggling, like we are all struggling trying to answer this question.

One point where I wish there was a little bit more analysis is on the media front, being himself in the world of the media. But I didn’t see an analysis of, number one, the crucial role that media play in this balance between democracy and capitalism. Because news is a public good, and it can be easily distorted by money, and capitalism has plenty of money. News is also crucial in shaping how democracy works. So, the temptation is very strong.

Bethany: It’s interesting. I have not worked at a newspaper. I’ve only worked in magazine journalism, and the old system in which there was a big separation between church and state, meaning between the business side of the magazine and the editorial side of the magazine, was a darn good system. I never saw a decision get corrupted by the obvious factor of money. In fact, Fortune deliberately chose a couple of times to anger major advertisers just to prove journalistic independence.

What went wrong more often, and I think leads to a bigger point about news, is the human desire to be liked, that it is hard to make enemies. And so, when you’re a journalist covering people and interacting with them regularly, it’s a lot nicer to have your phone ring with somebody saying, “Aren’t you brilliant? Look, that piece you just wrote, it’s so smart,” than it is to have your phone ring and have people say, “You idiot.”

At least what I saw of the deeper form, I don’t know whether to call it corruption, in news, was more a failing of human nature than it was a failing of money or any form of explicit corruption. But I do think, when I look back on this, I began to wonder also, as I was reading his book and we were talking, if part of the problem is the way business news grew up in the US. It was almost as if business news was sort of the ghetto where you didn’t want to work, and if you were writing for the business section or working for a business magazine, it meant you weren’t a real journalist and you weren’t valued, and it wasn’t important. And you can even see that today in the fact that the business section of the New York Times has long been kind of a backwater. It wasn’t the place where the really aspiring writers went to work.

And when you think about this critical intersection between democracy and capitalism, it does make me think that business writers need to have a bigger responsibility and a bigger sense of how business and capitalism fit into a democracy, and that there can’t be this tight segmentation of business news as being this thing that sits over here that doesn’t connect with the rest of the world.

And I think, sometimes, some of that is built into almost American collegiate training where we’re . . . you almost come away from college sometimes, at least some colleges, with a sense that business, ugh, that icky, dirty thing over here. If I’m really smart and creative and interesting, I don’t do any of that stuff. And I wonder if some of that deliberate ignorance has led to some of our problems.

Luigi: No, I completely agree. But I want to contradict you a little bit here, and maybe we need to have another episode on this, but you started your job at the time when a lot of magazines and a lot of newspapers were making a lot of money. Monopoly provides a lot of benefits, including a quiet life and independence. If you need to actually work for a living as a newspaper, you are much more subject to pressure.

The second point is actually a brilliant point that Chomsky made to a BBC journalist, where he was arguing the way I was arguing, and the BBC journalist was very outraged and said exactly what you said, “Oh, are you thinking that I’m corrupt,” and da, da, da. And he said, “No, no, I have no doubt that you write what you believe. I simply say that if you believed something differently, you would not be where you are.”

Bethany: That is extremely well said, and that is often really, really true.

Luigi: I think we should have a separate episode on this. But what do you think about Martin Wolf’s proposal that you need to tax Google to subsidize the local news?

Bethany: I mean, I think that’s not a bad idea. What I would have hoped is that both Facebook and Google—and Facebook kind of has, to some extent—would have understood that it was in their interest to support local news and to support news as a whole. Because if news goes away, Facebook and Google in some ways—and this is a giant oversimplification—are parasites sitting on top of the decaying apparatus of media in the United States, because if there’s nothing left to google and there’s nothing to share with your friends on Facebook, then the value of those two institutions goes down substantially. So, I would have hoped that there wouldn’t have been a need to tax it.

But if you think about what’s happening with ChatGPT, I mean, the time for that may be done and the decay in Facebook’s business . . . I mean, we may be having a discussion about solutions when the entities that he’s talking about are starting to lose their power.

We’re running out of time, but I wanted to conclude on that question that I had asked him at the end, which is, I do think there’s this incredible tension in the stated purpose of his book and his underlying cynicism. But there’s also this note of pessimism that it maybe isn’t fixable. And that, to me, is a really frightening tension.

Luigi: Antonio Gramsci, who is the only Italian philosopher of the 20th century worth knowing, said that there is the optimism of the will and the pessimism of the reason, which is a beautiful sentence, because as a rational human being, you see a lot of reasons to be pessimistic. But on the other hand, you have to—and this is also what Martin was saying—you have to be optimistic.